In brief

  • The STABLE Act would require stablecoin issuers to meet the same sorts of regulatory requirements as banks.
  • It was proposed by Representatives Rashida Tlaib, Jesús “Chuy” García, and Stephen Lynch.
  • It has not been assigned to a committee.

A trio of Democratic lawmakers has introduced a bill that would regulate stablecoins, including Facebook’s Diem (formerly Libra).

Congresswoman Rashida Tlaib, along with Rep. Jesús “Chuy” García and Rep. Stephen Lynch, announced the Stablecoin Tethering and Bank Licensing Enforcement (STABLE) Act

The STABLE Act, as written, would require stablecoin issuers to have a banking charter and earn regulatory approval from the Federal Reserve, the FDIC, and other agencies before issuing that coin. They must also be FDIC-insured or maintain an equivalent number of dollars at the Federal Reserve.

That's a high threshold to meet.

Even the so-called "crypto banks" that have earned bank charters in Wyoming—Kraken Financial and Avanti—are going through state-level processes that aren't regulated by the Office of the Comptroller of the Currency, as national banks are. Moreover, the FDIC doesn't currently allow for insurance on crypto assets.

While the press release notes that the “COVID-19 Pandemic has exposed numerous barriers to accessing and utilizing mainstream financial institutions,” the authors are clear that they don’t want bad actors flooding in to take advantage of low- and middle-income Americans. It specifically namechecks “shadow banks”—financial firms that aren’t regulated as banks but can issue loans and other products.

Representative Lynch noted, “Stablecoins present a new and innovative way for consumers to use their money and I believe this technology can be used to make financial transactions more efficient while potentially increasing financial inclusion.”

But Lynch and his colleagues want to err on the side of regulation—lest cryptocurrency providers become too much like banks.

“Getting ahead of the curve on preventing cryptocurrency providers from repeating the crimes against low- and moderate-income residents of color that traditional big banks have is—and has been—critically important,” said Rep. Tlaib.

Rep. García adopted an equally wary tone: “The Trump administration’s deregulation of our financial system has opened the door for tech companies to consolidate their power by preying on people of color with products that promise inclusion but only undermine our banking system.”

The STABLE Act has not yet been assigned to committee, though Rep. Lynch chairs the Task Force on Financial Technology.